Risky Transition?

Opportunities and risks may be created depending if US$100 trillion investment is invested under a net zero scenario or business as usual.

The firms which profit most from the transition will not necessarily be the ones making the most of green investment. The sectors that need most of the investment to achieve net zero by 2050, are, it seems, at least in part, being shunned by some investors for the very same reasons.

Not everyone agrees how much capital spending will be required to ‘green’ the world. It is complicated by things such as technological progress and the fact there is no consensus on precisely what should be considered ‘green’ investment. For example, if industrial-scale lithium-ion batteries become the primary source of electricity storage, much of the gas infrastructure would be rendered useless and scrapped, resulting in a different level of investment to reach net zero. Likewise, the ability to use existing aircraft will depend on which low-carbon aviation technology becomes established.

Some corporates must either absorb significant losses or will need to be compensated for these necessary losses. This is the greatest challenge in meeting the Paris climate goal. Our analysis also shows the amount of assets that are stranded rises the longer the transition gets delayed.

Shamik Dhar, chief economist at BNY Mellon Investment Management and co-author of the report, An investor’s guide to net zero by 2050.

Disclosure

All investments involve some level of risk, including loss of principal. Certain investments have specific or unique risks. No investment strategy or risk-management technique can guarantee results or eliminate risk in any market environment.

This material has been provided for informational purposes only and should not be construed as investment advice or a recommendation of any particular investment product, strategy, investment manager or account arrangement, and should not serve as a primary basis for investment decisions. Prospective investors should consult a legal, tax or financial professional in order to determine whether any investment product, strategy or service is appropriate for their particular circumstances. Views expressed are those of the author stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change. This information may contain projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or expectations will be achieved, and actual results may be significantly different from that shown here. The information is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.

There is no guarantee that any strategy that considers environmental, social, and governance (ESG) factors will be successful, or that any strategy will reflect the beliefs or values of any particular investor. Because ESG criteria exclude some investments, investors may not be able to take advantage of the same opportunities as investors that do not use such criteria.

Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others.

BNY Mellon Investment Management is one of the world’s leading investment management organizations, encompassing BNY Mellon’s affiliated investment management firms and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally.

Not FDIC-Insured | No Bank Guarantee | May Lose Value

MARK-320607-2022-11-11